How should the wages of a sheet metal worker in a fabrication plant be classified?

• A. Manufacturing overhead
• B. Indirect labor cost
• C. Direct labor cost
• D. Administrative expense

Answer: (C)

Verified step by step guidance

1. Understand the classification of costs in financial accounting: Costs are typically categorized as direct costs, indirect costs, manufacturing overhead, or administrative expenses.
2. Identify the role of the sheet metal worker: A sheet metal worker in a fabrication plant is directly involved in the production process, contributing to the creation of the product.
3. Define direct labor cost: Direct labor costs are wages paid to employees who are directly involved in the manufacturing or production of goods. These costs can be traced directly to specific products or jobs.
4. Compare with other classifications: Manufacturing overhead includes indirect costs like factory utilities or maintenance, while indirect labor cost refers to wages for employees not directly involved in production (e.g., supervisors). Administrative expenses are costs related to general business operations, not production.
5. Conclude the classification: Since the sheet metal worker is directly involved in the production process, their wages should be classified as a direct labor cost.